Hongkong Land Holdings Limited‘s (SGX: H78) share price has fallen by 13.4% from a 52-week high of US$7.44 to US$6.44 currently. In my previous article here, I looked at two reasons why Hongkong Land is a bargain now. As a quick recap, those reasons were:
1) Stable business track record
2) Stable dividends
In this article, let’s look at the final reason why Hongkong Land is a bargain now.
An analysis of a company is never complete until investors consider its valuation. After all, we are always trying to buy an investment at a price that is lower than its intrinsic value. Personally, I like to pay anything less than 70 cents for a dollar of value.
In the case of Hongkong Land, we can argue that its current valuation is highly attractive to bargain-seeking investors. Let’s consider two perspectives.
Firstly, Hongkong Land’s current price-to-book (PB) ratio of 0.41 (based on current share price of US$6.44) is significantly lower than the market average’s PB ratio of 1.1. Here, I’m using SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
Secondly, not only is Hongkong Land’s PB ratio of 0.41 significantly lower than the benchmark, it’s also about 25% lower than its five-year average of 0.55.
As such, I think Hongkong Land is cheap based on its low PB ratio compared to the market and its own average.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has a buy recommendation for Hongkong Land Holdings.